EP68: Transitioning From Real Estate Investing to Mortgage Notes

Start Your Free Account Today: http://pstac.co/ytpod

In this episode, we talk about our upcoming "Real Estate Investing to Mortgage Note Investing Mini Series". If you're a Real Estate Investor and have wondered about what is possible with mortgage note investing, this is the episode where you will learn the beginnings of what is needed to make that transition. 

Our CEO - Rick Allen made the leap and in this episode and more after, he'll show you how you can too. 

For more videos on mortgage note & real estate investing SUBSCRIBE to our channel: https://www.youtube.com/paperstac?sub_confirmation=1
Press the bell icon to get notified of when our new videos are published.

Share this video: https://youtu.be/GnWKJo2SpZs
_______________________________________________________
Follow Us On These Platforms:
Facebook: https://pstac.co/facebook
Linkedin: https://pstac.co/linkedin
Twitter:  https://pstac.co/twitter

🔈 : SPEAKERS:  Rick Allen & Brett Burky

➡️  :  Check out our podcast:
https://pstac.co/podcast_on_youtube

➡️  : Check out our Snackable Series:
https://pstac.co/snackable_series

Follow Us On These Platforms:👇

• Facebook: https://pstac.co/facebook
• Linkedin: https://pstac.co/linkedin
• Twitter: https://pstac.co/twitter
• TikTok: ...

Transcript

ep68-transitioning-from-real-estate-investing-to-mortgage-notes 
 

Announcer: [00:00:00] Coming to you from Sunny Orlando, Florida. Welcome to the Paperstac Podcast, where we cover current topics in the note industry, give you tactics for your note business, and talk with industry leaders to make you a better note investor. And now your hosts, Brett Burky and Rick Allen. 

Brett Burky: Welcome to another episode of the paper stack podcast. 

Brett Burky: I am Brett Berkey and this is Rick Allen here. That's the name they gave me. That's right. We are back. We had to take a week off. We are doing some moving around. Moving the studio. We are moving to a bigger location. Bigger, better, badder. Yeah. Own parking lot type stuff. High tech. Yeah. We're all grown up. 

Brett Burky: All grown up. Yeah. Some new eating places, which is gonna be fun. Because we've eaten everything around here, so looking forward to having a whole new place to eat and a whole new side of the street. So that's what we missed last week. Sorry if you were waiting for it, but we are gonna be trying to be consistent from here on out. 

Brett Burky: If hopefully we won't miss any more. But so that's pretty much that. What else is going on? It's super [00:01:00] cold here in Florida. I know. Sorry. I know everyone's for Florida. It's cold because I don't have long johns and I don't have thick socks. And this last week I was, I decided to, what's funny is it's gonna, he needs  

Rick Allen: long johns because it's going to be like in the thirties. 

Brett Burky: I just know what long johns are, like, it's like long underwear or something, but yeah, I haven't, no?  

Rick Allen: Yeah, no that's exactly what they are.  

Brett Burky: Yeah yeah but Thermals, some people call them thermals. Thermals, yeah like an idiot, this last week I I decided, hey, it's not as hot, I'm gonna go ahead and I got one of those new smart thermostats, and so I was like, I'm gonna, I'm gonna change it, and so I took it off the wall of the thermostat, but it's a bigger hole, so I had to patch it, and I'm doing all this stuff And then finally, I get around to installing the new one, and it didn't work. 

Brett Burky: And Mr. Low Parts, there's no heat in the house, and so I'm like, oh crap. And my wife's just for the time being, put the old one back on. I was like, yeah. Threw it out. Trash day. It was yesterday. It's in the trash can. So we were walking around with Like sweatshirts and with [00:02:00] bath robes, drinking hot tea, have my hands over the stove, just heat my hands, but I had eventually having my buddies come on and it wasn't me this time. 

Brett Burky: It was the actual thermostat was faulty. I'm going with that. I'm going with that. That's what it was. But Rick, this week we're talking about something that's Something came up in a group I'm a part of called a wealth of that wall street where there's different ideas that are floating around and People talk about short term rentals talk about fix and flips whatever all these different strategies And of course I talk about notes and so there's a couple people in there that are intrigued and they're like, I'm already in real estate They're probably hearing the same things where you started like tired of this new the fix and flip I want to have something I want some a little bit more passive And they're like how did I transition to from, and I was like, I didn't transition. 

Brett Burky: I, I, Rick did though. I made the jump. Rick made the jump. So really what we're doing here is we're going to start a small series this next upcoming couple of weeks. So if you haven't subscribed, be sure to subscribe because each week we'll be putting out a new episode about. [00:03:00]  

Rick Allen: The transition from real estate to mortgage notes. 

Rick Allen: Why to do it, how to do it, and why now is the time to do it, really. It's a fantastic investment class. If you're investing in real estate right now, you have such a head start. Not that you can't start from scratch, but if you've been investing in real estate, it's an easy transition, and we're going to talk a little bit about why. 

Rick Allen: But! Before we do that, we've got a sponsor for today's podcast. That's right. And what better way to segue into this is it's the DME Expo, where you can go learn all about mortgage notes. And we've got a little something to play for you here from the DME, talking a little bit about the Expo. Over  

DME Advertisment: the last year and a half, low interest rates and trillions of dollars in government support has fueled record home price growth, the highest stock market in history, and inflation rates higher than we've seen in decades. 

DME Advertisment: But as history shows us, what goes up also comes down. Clark Street Capital, one of the leading loan investment firms, recently said they [00:04:00] believe the credit picture for banks is not as pristine as the numbers suggest. As they put it, excessive stimulus has a way of covering up problems. 2022 is shaping up to be the year this all unfolds, which is why on March 10th and 11th, 2022, over 175 investors, private lenders and industry experts We'll be meeting in St. 

DME Advertisment: Petersburg, Florida, to network and learn at one of the top note investing conferences of the year, the Diversified Mortgage Expo, or the DME. This two day event will have speakers like industry expert Marina Walsh, the vice president of analytics at the Mortgage Bankers Association, and over a dozen experienced hedge fund managers and investors who collectively have managed billions of dollars worth of mortgage notes over the last decade. 

DME Advertisment: Whether you invest in performing loans, non performing loans, first or second, a massive opportunity is coming, and the Diversified Mortgage Expo can help you prepare to profit. To learn more about the event or register, visit diversifiedmortgageexpo. com. Again, to register or learn more about the DME, [00:05:00] visit diversifiedmortgageexpo. 

DME Advertisment: com.  
 

Rick Allen: And we're back. The Expo. Hope to see you there. I'll be there. Brett will be there. It's gonna be cool. I'm up on stage speaking about sourcing inventory with somebody from Granite. Not Granite. Chaz. Chaz Gwynn from Revolve Capital.  

Brett Burky: And I'll be at the booth handing out tote bags, yeah, come by, get your, get yourself a tote bag. 

Brett Burky: Yeah, it's gonna be cool because I'm excited. There's a lot of people I know online that I just know online. I know their profile pic. I don't really know what they look like day to day, but. You know this, I've talked to him like, yeah, we're all going to Distress. Mortgage E Expo. And it's in St. Pete. St. 

Brett Burky: Peter is St. Pete. Yes. Yeah, it's  

Rick Allen: at the Hilton. Yeah. So it's Hilton  

Brett Burky: Bayview or something like that. St. Pete. So it's gonna be good. A lot of people. Good note crew St. Pete's gorgeous. So if you haven't been, it's a great place to just go down to the beach too. But after that, let's talk a little bit about the transition, Rick. 

Brett Burky: So Rick was an investor in real estate for over a decade, right? Yeah, of course. You all, if you've listened to the podcast, I stumbled into it and, They  

Rick Allen: Accidentally got into note investing.[00:06:00] It started not accidentally doing it, but then when I really bought my first note, it was by accident. 

Brett Burky: Not by accident, but it was just... Took a chance. You took a gamble. Yeah, 8, 000. What do they say? It's,  

Rick Allen: Preparation and opportunity holding hands. So that's what it was. It was, I was prepared to take the swing and then opportunity presented itself. So I did, and it worked out, fast forward. 

Rick Allen: Here we are talking to you on this podcast about it. But so the interesting thing about real estate investing and how it's an easy transition to mortgage notes is it's still all revolves around. Real estate, right? Because mortgage notes, mortgage debt, it's backed by a tangible asset in real estate. 

Rick Allen: One of the biggest things you have to do in this is understand, worst case scenario, I take the asset back, how do I manage the actual real estate? You have to know how to evaluate the real estate, you have to know as far as valuations go, you have to know how to manage a rehab, estimate a rehab, understand the area, look at a house from [00:07:00] pictures and get an idea of what's going on with the house. 

Rick Allen: So a lot of the everyday stuff you do as a real estate investor, it just it dovetails so nicely with  

Brett Burky: note investing. That makes sense. Yeah. That makes sense. Huh. That is interesting to know. And then you have this good groundwork that you have for real estate investing. What is the first, second layer that would be needed for note investing? 

Brett Burky: I think education is it.  

Rick Allen: I think educating when you're making that pivot or you're making the jump or you're adding, I don't want to say pivot or jump because as a note investor, you're still always a real estate investor, right? It's just another opportunity. You don't say I just invest in Apple stock. 

Rick Allen: Maybe you do, but most people invest in the stock market. They're diversified. They invest in the stock market. They do some real estate, maybe they're doing some Bitcoin or some of some cryptocurrency stuff along those lines. So adding notes to it is not saying I'm never investing in real estate again and saying I'm adding the ability to invest in notes And the first thing you [00:08:00] want to do is you want to make sure you're educated on that and that's you know, whether that be you know, the paper stack Academy whether that be doing something You know with events like huge you can learn so much from events And you can learn so much from just being around people in the note space. 

Rick Allen: How much have you learned? You haven't had formal education  

Brett Burky: about notes. No. I've learned a lot just by, seeing what people say in Facebook groups and just being a part of that. Everyone's pretty, giving with their knowledge. By knowing me. Yeah, but yeah I asked all the questions, so I get to,  

Rick Allen: yeah, no, but just being around people talking with people at the events, you hear different stuff and you should always be learning. 

Rick Allen: So education is number one. So that is, you should educate yourself.  

Brett Burky: But yeah, the also the really cool thing is that if you are in real estate, the idea of how you evaluate a note always usually pulls back to value, right? You're always planning for the worst. And as a real estate agent or an investor, how to, Understand the value of the house with what's going to [00:09:00] be for rehabs with it. 

Brett Burky: Yeah,  
 

Rick Allen: what's the loan to value? What's your investment to value, the ARV after repair value all those things after repair value doesn't really that's that Always raises a red flag because I think wholesaler they talk about ARV, but it's something you calculate in there for sure if you're looking at a house and say, okay What is this house worth right now in its current condition? 

Rick Allen: What is it if I did quick sale it? And what is it if I put a bunch of money into it, fix it up? Because that you'll hear some people say after a pair of value, it doesn't matter for notes. It does matter for notes. If you have to take the house back, because you want to know what's the house worth. 

Rick Allen: And there's been several houses that we've wound up foreclosing on where we had a quick sale value of 130, 000 and an after repair value of 220, 000. And if you put in, 25, 000 or 30, 000, it's it makes sense. You, it, the lift is worth it. And sometimes the lift isn't worth it, but that's why you want to, having that real estate background is so valuable [00:10:00] because you're used to those numbers. 

Rick Allen: You're used to looking at something and saying. Is this a paint and carpet deal or is this a whole new kitchen, new bathroom? We're going to do that. And you can, then you have that experience of running multiple different rehab scenarios, because I'll tell you this pain carpet is much easier and quicker than doing to opening up walls or put, yeah. 

Rick Allen: Once you start opening up walls.  

Brett Burky: He liked to say that. It's the fan. Yeah, no, that's interesting. So yeah, throughout this series we're going to, want to keep these short and concise. Short and sweet, we're going to talk about them. Yeah, we're probably going to try to just go ten minutes in each video. 

Brett Burky: So the first one is just showing what else you need to know. So in the next couple videos we're going to talk about... What are the next layers of due diligence that you probably would need to know? Yep. So you understand how to run values, you understand how to do, if you need to repair, whatever, what it's going to be worth as a real estate investor. 

Brett Burky: In our next episode, we're going to talk about the things you need to know as due diligence on the borrower. Running due diligence on the borrower.  

Rick Allen: There's [00:11:00] definitely a lot we're going to cover in the next episode, especially like... Why now? Why now? That's important. Why now? The next episode, I'm going to tell you why now is the time to start investing or to make that transition. 

Rick Allen: And believe me, it is, it's a global thing that's coming right now. So you want to have this bullet in your  

Brett Burky: gun. That's right. But yeah, so we're gonna leave it here. If you have not subscribed and you just first time seeing this or hearing it, please subscribe because you don't want to miss this series. 

Brett Burky: And we look forward to seeing you next week. Stay warm out there and we'll talk to you soon.